Infosys has emerged as a dark horse in IT counters: Kaustubh Belapurkar, Morningstar Investment

NEW DELHI: Talking to ET Now, Kaustubh Belapurkar, Morningstar Investment, says there is a clear trend emerging that financials are the favourites but also new names like Infosys are cropping up.

Edited excerpts:

Any take on this much frenzied pocket -- the newly listed ones or the Venky’s of the world? What is going on here?

There has been activity even from the fund management space where they have been slightly selective about what they want to buy and this month has been interesting in that more than an IPO frenzy, there has actually been a QIP sort of buy in. There has been two large buys, one in SBI which has been bought in a big way but even Federal Bank found buyers among a lot of managers. So, there has been some selective buying in IPOs and that is the trend we have been seeing but I do not think it is over-blown from the fund managers’ side.

Where else are you seeing rush to buy into the stocks?

It is a mix in some way. The usual suspects keep coming up. I spoke about SBI which managers continue to buy. ICICI is something where you see month in month activity and there has been huge buying in this month. Rs 3000 crore of fresh purchases. Through the year, it is about Rs 8000 crore, which is pretty significant from that perspective.

New names sort are coming in like Petronet. Quite a few fund houses have actually added absolutely fresh positions to their portfolios. ONGC continues to see additions on large cap space. On the midcap again, it has been interesting where you have seen some of the diagnostic names like Dr Lal PathLabs being bought. SBI has been holding it since the IPO. They have been adding some positions. Thyrocare is another name that you will see in the top buying list on the midcap side. There have also been some arbitrage plays that have been coming in. Fortis Healthcare, which obviously has been in news in terms of who is buying them and who is not, has seen arbitrage players entering the stock.

There is a clear trend emerging that financials are the favourites. I spoke about Federal Bank earlier. that is another top midcap name and then Infosys which has been a laggard so far, suddenly has seen some buying in June. So some usual suspects and some new names that are cropping up.

I just looked at your data point and one stock which is popping out there is ICICI Bank. Now SBI has this huge fat mega QIP. Obviously, the interest would be there. But ICICI Bank according to your analysis has also seen an inflow of about Rs 3000 crore.

In this month and Rs 8000 crore for the year, which is pretty significant.

And the stock is still not going anywhere? Who has bought into ICICI Bank aggressively?

It is a couple of fund houses. I do not remember, at top of mind I think there is Birla and HDFC if I am not mistaken though.

Which is the one stock which is really a standout surprise from you from the largecap space or from the midcap space? Anything which is very stark?

Infosys is one of the names that has been kind of dark horse in that sense. If you look at IT on the other counters, there has not been much activity. In fact, in some of the midcap names like Mphasis and MindTree, there has been selling from the funds. So Infosys is a kind of dark horse which has seen some buying activity contrary to what has been happening in the previous month. So, that is one of the names. The other one on the flip side under selling pressure is Reliance. It has been one of the top sellers for the funds again and that is a trend that has actually been continuing from the last three-four months on Reliance despite the stock continuing to reach new highs.

Is it only Infosys within the IT pack where one is seeing buying and not TCS or any other?

In TCS, there is a very marginal buying if any. In Wipro, clearly there is no buying and in fact if we look at Cognizant which obviously is a US listed stock and that has also been seeing a fair bit of selling and especially this month there has been a bit of selling. In tnd the mid-cap names like I mentioned earlier, you can see some marginal cutting of positions.

What is happening with pharma because that really has shown up and sprung up really well, be it Aurobindo Pharma or be it smaller ones like Alchem. Biocon of course is making fresh highs every day, what is the fund activity there?

Pharma is again a very funny and a very unique story. Like last month we saw buying in Sun Pharma. When I look at the data this month, there has actually been selling on that counter. And again it is not a consistent selling across the counter. There are some funds who are buying and there are some funds who are selling but overall that is a sell on the aggregate basis. Aurobindo Pharma has seen some buying but if you look at it, the overall aggregate numbers in pharma exposure is still largely coming off.

HDFC Bank, while it is not popping up on the top list but it continues to be added to portfolios.

So the incremental flows which we are getting is about Rs 4000 crore, Rs 4500 crore on a monthly basis?

Actually, now it is about Rs 14000 crore almost.

I am talking pure equity.

Pure equity would be about Rs 10000 crore. That is the SIP numbers.

It is Rs 10,000 crore a month now?

Pretty much. On an aggregate basis, equity and equity related balanced funds typically invest 65% plus. It is about Rs 83000 crore for the year YTD up to June. We have outpaced the FIIs and left them behind and that is the only domestic mutual fund. All of this money obviously has not come to the market as yet. We are still sitting at about Rs 30000 crore of cash from the managers but afair bit has already been deployed.

Can I say that the cash positions with domestic institutional investors is at a record high?

It is. It has been for the year. In terms of absolute numbers, yes but if I look at it as a percentage of their portfolio, it is not obscenely large because in 2009 we have seen cash levels of 14-15%, 20% at times. So, clearly that has gone away, they have inched up a little bit on cash but 5.2% of the overall portfolio on an aggregate basis is not alarming. But definitely, it has inched up. But if you look at it in absolute numbers, Rs 30000 crore is pretty sizeable.How would you define the current positioning for fund managers? Are they betting on cyclicals, are they still betting on defence, what is the basic way in which they are leaning?

The trend that has emerged over the last few years and continues to emerge is clearly recovery in the Indian economy. You look at financials, cyclicals, basic materials like cement and metal is something which they have been adding positions on. We spoke about it last time in terms of the way financials are almost 29.5% of the overall portfolios. And just for comparison sake, I was looking at what foreign managers investing into India. They have also been increasing and they are looking at exactly these segments but they are holding about 25% on financials.

Because you cannot buy HDFC, you cannot buy some of the stocks because of limits.

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